Sharemarket Set To Surge To New Heights

Sydney Morning Herald

Sunday April 28, 1996

By STEPHEN CAUCHI and MICHAEL WEST

The Australian stockmarket is poised to break its all-time high this week, provided Wall Street remains firm and commodity prices hold up.

The All Ordinaries index closed 9.7 points higher on Friday to finish at 2,326, only 14.6 points from its record level reached in February 1994.

"If (overseas markets) remain stable, the gold price continues to move upwards and commodity prices take a bit of an upward tick, there's no reason why the market shouldn't push through those all-time high levels," said Mr Jamie Spiteri of Shaw Stockbroking.

The market will open today, however, with little direction from US markets. On Friday night, the Dow Jones index rose just 1.1 point to 5,568.

Although Wall Street improved slightly over the week, American investors are uncertain as to the strength of the US economy.

Several crucial US economic reports will be released this week, including economic growth figures and the latest employment data and US bond dealers are waiting to see if the reports signal a change in official US interest rates.

Benchmark 30-year US Treasury paper was unchanged on Friday night. Despite uncertainty in US markets, which are a major influence on domestic markets, local investors remain optimistic.

The June Futures Share Price index, which acts as a forecast to the All Ordinaries position at the end of the quarter, is at 2,358 - a 32-point premium to the physical market.

The optimism was fuelled by the release of subdued inflation and wages data last week, which sparked hopes of a cut in interest rates and increased corporate earnings expectations.

Mr Robert Hyden of ANZ McCaughan also pointed to the takeover activity in the small-to-medium stocks as a factor underpinning the sharemarket. There have been a rash of takeovers in both resources and industrial stocks and that is a trend tipped to continue. However, several brokers questioned the market's long-term future. Mr Lee Iafrate of D&D Tolhurst predicted that poor financial-year results could dampen the bullishness.

He said company profit results needed to reflect the improved outlook for inflation and wages. "There's still a bit of uncertainty about the wages environment ... my personal view is that we're not going to have a big rally from here on in.

"We might get there (to the record) and come back a bit."

Mr David Perry of Austock Brokers said: "Provided we don't get a fallback on Wall Street we'll probably see it break the record in the next couple of days. How far it'll go and whether it'll hold ... but there's underlying confidence and bullishness, that's reflected in the Futures index."